Expandable polystyrene (EPS) and polystyrene (PS)

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A versatile plastic used to make a wide variety of consumer products, expandable polystyrene (EPS) and polystyrene (PS) are integral in industries such as food packaging, appliances, construction, and some niche automotive applications for polystyrene, and for expandable polystyrene construction, white goods packaging, and fish boxes packaging. These industries and more are impacted every day by the dynamics of global and regional PS and EPS markets, as well as developments in the upstream styrene market.

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Expandable polystyrene (EPS) & polystyrene (PS) news

German auto industry opposes EU tariffs on EVs from China

LONDON (ICIS)–Germany’s auto industry is opposed to tariffs on electric vehicles (EVs) from China, trade group German Association of the Automotive Industry said on Wednesday. The group, known as VDA in its German acronym, was reacting to a European Commission proposal of tariffs on battery electric vehicles (BEVs) from China after an investigation concluded they benefited from unfair subsidies. VDA said the proposed tariffs were not the right tool to strengthen the competitiveness of Europe’s auto industry. Instead, the tariffs would further escalate the risk of trade conflicts, to the detriment of Germany’s automakers, it said. “The fact is that we need China to solve global problems,” in particularly in dealing with the climate crisis, it said. China played a crucial role in a successful transformation towards electromobility and digitalization, and a trade conflict would jeopardize this transformation, the group said. However, VDA added that the extent of the subsidies China grants EV makers was “a challenge” for Europe and it called on China to make “constructive proposals” to settle the dispute. Germany ranks first in Europe and second after China globally in terms of EV production, and the bulk of German EV production goes into export, according to VDA data released this week. Industry observers have noted that Germany-based EV production relies on imports of materials and batteries from China. The US last month announced tariff hikes on Chinese imports of EVs, batteries and other materials, starting 1 August. In related news, the business climate in Germany’s automotive industry deteriorated in May amid fears about impacts on German automakers from the conflict with China, according to a recent survey by Munich-based ifo research. The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA). Additional reporting by Graeme Paterson Please also visit the ICIS topic page Automotive: Impact on chemicals Thumbnail photo shows a Volkswagen EV; photo source: Volkswagen


Styrolution to permanently shut Sarnia styrene plant in Canada

HOUSTON (ICIS)–INEOS Styrolution will close its 445,000 tonnes/year styrene production plant in Sarnia, Ontario, Canada, by June 2026, the company announced Tuesday. Styrolution has been involved in a dispute with Canadian government officials over the plant after a nearby indigenous group complained about benzene emission levels from the site. The company shut the plant for maintenance in April after the complaints surfaced. But Styrolution said that was not the reason for the plant closure. “Our decision to permanently close the Sarnia site by June 2026 is irrespective of the current situation,” the company said in a news release. Styrene producers in North America, as well as globally, have been battling poor economics due to over-capacity. North American styrene operating rates have been under 70% so far this year. China, once a key outlet for North American styrene, has added significant styrene capacity over the past three years. China commissioned 3.7 million tonnes of styrene capacity in 2023 alone. “This difficult business decision to permanently close our Sarnia site was made following a lengthy evaluation process and is based on the economics of the facility within a wider industry context,” Styrolution CEO Steve Harrington said. “The long-term prospects for the Sarnia site have worsened to the point that it is no longer an economically viable operating asset.” Even with the loss of styrene supply to the market, the Sarnia plant closure in April has had no impact on styrene spot prices. “Additional large investments that are unrelated to the potential costs of restarting operations would be necessary in the near future. Such investments would be economically impractical given today’s challenging industry environment,” Harrington said. In late May, Canada’s federal environment minister extended an order imposing stricter benzene emission controls on plants operating at the Sarnia petrochemicals production hub in southern Ontario, close to the US border and Detroit, Michigan, for two years. The order came after an Ontario provincial ministry suspended production operations at Styrolution's Sarnia styrene plant following the complaints from residents about potentially high benzene emissions. In addition to styrene, the Sarnia plant has ethylbenzene production capacity of 490,000 tonnes/year, according to the ICIS Supply and Demand Database. Styrolution operates two additional styrene plants in North America – the 770,000 tonnes/year facility in Bayport, Texas, and the 455,000 tonnes/year plant in Texas City, Texas. The Sarnia plant represents approximately 7% of North American nameplate styrene capacity. Styrene is a chemical used to make latex and polystyrene resins, which in turn are used to make plastic packaging, disposable cups and insulation. Major North American styrene producers include AmSty, INEOS Styrolution, LyondellBasell Chemical, Shell Chemicals Canada, Total Petrochemicals and Westlake Styrene. Thumbnail shows a cup made of polystyrene (PS), which is one of the main derivatives of styrene. Image by ICIS.


Mexico’s Altamira petchems force majeure declarations continue on severe drought

SAO PAULO (ICIS)–Petrochemicals producers in the production hub of Altamira, in the Mexican state of Tamaulipas, keep declaring force majeure as a severe drought halved water supplies to industrial players. On Thursday, a spokesperson for Cabot said to ICIS the company has also declared force majeure for carbon black from its Altamira facilities, which adds to several force majeure declarations in the past two weeks. The drought affecting Tamaulipas has its epicenter in the south of the state, where Altamira is located, and recent minimal rainfall has not helped much to fill up the state’s water reservoirs. The drought, which the state government says has lasted already eight years, has reached a critical point in 2024, prompting authorities to arrange water deliveries in tanker trucks from other state municipalities as well as other Mexican states. The crisis could end up hitting US petrochemicals, as the state is a key supplier to that market. Earlier this week, M&G Polimeros declared force majeure on one of its two polyethylene terephthalate (PET) lines from Altamira. The line has a production capacity of 420,000 tonnes/year, which has prompted fears the US’ PET supply could be hit. PETROCHEMICALS HIT HARDCabot’s force majeure from Altamira on carbon black – a material used as a colorant and reinforcing filler in tires and other rubber products, as well as a pigment and wear protection additive in plastics and paints – follows a string of declarations from other producers. “Over the past weeks, the water supply to our Altamira plant has deteriorated in both quantity and quality. Consequently, our plant is currently unable to operate all production units and is running limited production, along with warehouse, packing, and shipping operations,” Cabot’s spokesperson said. “Due to this situation beyond our control, Cabot has declared a force majeure for carbon black from this facility.” Apart from M&G Polimeros’ force majeure on PET, several other producers in Altamira have also issued force majeure declarations or have sharply reduced operating rates. Mexico’s chemicals producer Orbia/Vestolit, a large polyvinyl chloride (PVC) player, was one of the first companies to declare a force majeures out of its facilities in Altamira in mid-May. This week, a spokesperson for the company said to ICIS the force majeure remained in place, with no expected date for return to operations as the water situation has not improved, rather the opposite. Saudi petrochemicals major SABIC declared force majeure on acrylonitrile butadiene styrene (ABS). European major INEOS Styrolution also declared force majeure on ABS from Altamira, as well as on general purpose polystyrene (GPPS). US chemicals producer Chemours also said it has halted titanium dioxide (TiO2) operations in Altamira. Germany’s major BASF, also with facilities in Altamira, had not responded to a request for comment at the time of writing. Trade group the Association of Industrial Companies of Southern Tamaulipas (AISTAC), which represents many of the producers listed above, had not responded to a request for comment at the time of writing. WATER TANKERS, DRY LAGOONSThe governor of Tamaulipas, Americo Villarreal, ordered this week to send tanker trucks to the south of the state from other municipalities not affected as harshly by the drought, as well as from other Mexican states. The trucks will not sort out the dire situation at industrial parks, however, as the water will be deployed to households, which are also suffering water restrictions. “With the arrival of these units, support to the southern area of ​​Tamaulipas is reinforced, adding to those that the Secretariat [agency for hydraulic resources] had previously sent, as well as those that have arrived from other entities, with 50 units distributing water,” said the state’s government. “[This] coupled with the installation of 25 isotanks with a capacity of 24,000 liters in strategic points, sent previously by the agency.” As if it was not enough for tamaulipecos to suffer water restrictions in their own homes, natural spaces they hold dear are also showing the scars of more severe droughts as climate change advances unabated. This week, local media reported how Champayan lagoon, a large water natural reservoir west of Altamira, dried up practically from one day to the other. Front page picture: Tanker trucks heading to the Altamira area for emergency water supplies for households Source: Government of Tamaulipas Clarification: Re-casts paragraph 15


Eurozone private sector momentum hits one-year high in May

LONDON (ICIS)–Business momentum in the eurozone hit the highest level in 12 months in May, pushing further into growth territory as service sector orders surged and the manufacturing industry showed signs of recovery. The eurozone composite purchasing managers’ index (PMI) rose to 52.2 during the month compared to 51.7 in April as stronger demand buoyed output and hiring, according to data from S&P Global. Momentum improved for most of the eurozone’s largest economies with the exception of France, where a renewed contraction in private sector activity drove PMI growth back into negative territory at 48.9, a two-month low. A PMI score of above 50.0 signifies growth. Growth in Germany, which has suffered a deeper and more protracted downturn than most of the core economies, continued to rally on the back of improved output to  a 12-month high of 52.4. Italy’s recovery slowed during the month, dropping to a three-month low of 52.3, while Spain remained the strongest core performer with activity rallying to a 14-month high of 56.6. The sustained strong momentum points to an exit from contraction for the eurozone economy, despite eurozone manufacturing activity in the bloc remaining in recession footing. According to data released earlier this week, the manufacturing sector's PMI rose to a 14-month high of 47.3 in May, despite remaining some ways short of stabilising. “The spectre of recession is off the table,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which helps to assemble the composite data. “In Germany, we can now talk of an upward trend, Italy's business activity remains solid, and Spain has improved from an already strong position. “ “Only France has experienced a setback, slipping into slightly negative territory. Overall, the service sector is likely to ensure that the Eurozone will show positive growth again in the second quarter,” he added. Inflationary pressure also eased during the month, despite an increase in overall levels for the eurozone according to flash estimates from statistics body Eurostat issued last week. Inflation is expected to be 2.6% in the eurozone for May compared to 2.4% in April on the back of higher service and food price inflation. Overall price gauges indicate cooling inflationary pressures during the month, according to the PMI data, but input cost increases remained sharp and well above pre-pandemic levels. The rate of inflation for output costs eased to the lowest level in six months, but was still substantially above pre-2020 averages. The European Central Bank is set to make a decision on whether to cut interest rates for the first time in eight years on Thursday. “The European Central Bank (ECB) is getting a tailwind from the PMI,” said de la Rubia. The PMI price components for the service sector indicate a slight easing of inflationary pressures, making an ECB rate cut on June 6 more likely. Reduced inflation pressures are evident in both costs and selling prices.” “However, the PMI price indices do not yet give the all-clear, as they are unusually high in the context of the rather weak economic situation,” he added. (Thumbnail photo: Cargo ships pulling into the port of Hamburg (Source: Fotowerkstatt-ks/imageBROKER/Shutterstock)


INSIGHT: Coalition government to rule India as Modi's BJP suffers major setback

MUMBAI (ICIS)–A Bharatiya Janata Party (BJP)-led coalition government is expected to assume office in India, with a third term for incumbent Prime Minister Narendra Modi which should ensure continuity of most economic policies. BJP secures 240 seats in Lok Sabha, down from 303 in 2019 India targets sizeable share in global manufacturing pie Legislative process for reforms faces possible delays The BJP-led National Democratic Alliance (NDA) has won the elections, with a tally of more than 290 out of a total of 543 seats in the Lok Sabha or lower house of parliament, ensuring a third consecutive five-year term for Modi’s political party. The numbers, however, were well below expectations of 400 seats. BJP alone secured less than half of the total seats available at 240, below the required 272 for an outright majority. In 2019, the party had secured 303 seats. India, a south Asian emerging market giant, held its national elections over the past six weeks until 1 June. It was the world’s biggest democratic elections, with nearly 970 million eligible voters. “The BJP-led NDA alliance is a pre-poll alliance, and hence, we see less friction in the government formation exercise. Prime Minister Modi in his victory speech re-affirmed his commitments to reforms and growth,” Indian financial services firm Motilal Oswal said in a report on 4 June. GDP GROWTH ROBUST The Indian economy has emerged as among the top-performing economies in the world, logging an 8.2% GDP growth for the fiscal year ending March 2024, with the fiscal Q4 growth at 7.8%. The Reserve Bank of India (RBI) forecasts a 7% GDP growth for the current fiscal year 2024-25, based on the central bank’s annual report released on 30 May. “The Q4 GDP growth data for 2023-24 shows robust momentum in our economy which is poised to further accelerate. As I’ve said, this is just a trailer of things to come,” Modi said on social media platform X on 31 May. “Fundamentally, India is witnessing its own mini-Goldilocks moment with excellent macros, solid corporate earnings,” Motilal Oswal said in a report dated 3 June. Confederation of All India Traders (CAIT) secretary general Praveen Khandelwal said: “We expect the government to formulate new initiatives, provide policy support and take necessary steps to boost domestic trade and exports,” As part of an election pledge to transform India into a global manufacturing hub, the BJP government wants to offer subsidies for domestic production modelled on recent packages for semiconductor firms and electric vehicle makers, newswire agency Reuters reported on 3 June. The government plans to increase India's share of global manufacturing to 5% by 2030 and to 10% by 2047. To increase the country’s manufacturing capacity, the government is expected to introduce new laws, tax reforms, trade pacts and duty reforms to promote ease of doing business. On its third term, Modi's government could bring about reforms in all factors of production including land, labour, and capital, Indian finance minister Nirmala Sitharaman had cited in February. There were also plans to lower trade barriers to help develop domestic industries. The new government is expected to reduce import duties on various components used in the textiles, engineering goods and other industries. India has already reduced tariffs on several mobile device components to boost production and make exports competitive. POSSIBLE DELAYS IN LEGISTATIVE REFORMS With the party’s weakened grip in the lower house, however, legislative reforms such as proposed changes to the goods and service tax (GST) may be delayed. The GST – a single tax that replaced multiple indirect taxes – was introduced in 2017. The government had proposed certain amendments to the GST in the national budget announced in February, which included penalties and changes in procedure of applying the tax. Any proposal to hike the tax rate as part of fiscal reforms is likely to be resisted. Plans to amend India’s Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013, which would make it easier for industries to acquire land may also be subjected to delays. The proposed changes are aimed at freeing acquisition of land from existing restrictions, for certain types of projects like those related to defence, infrastructure and industrial corridors. A third term for a BJP-led government is expected to ensure continuity in India’s economic landscape, with increased focus on clean energy, infrastructure, and manufacturing. “Regardless of the election outcome, policy focus will remain on sectors considered strategic by the major domestic political parties, including renewable energy, automotive, electronics, textiles, digital infrastructure, logistics, food production and services,” research agency S&P Global Market Intelligence had said in a report on 29 May. However, as no political party has been able to secure majority seats by itself, the BJP will be forced to rely on its coalition partners. “A substantial cabinet reshuffle is almost certain in this scenario, with portfolio allocation being distributed across coalition parties and with policymaking becoming decentralized,” S&P stated. The government’s policies will focus on encouraging macroeconomic growth to keep India on track to become the third-largest contributor to global GDP by 2030, it said. Also high on the government’s list of priorities are infrastructure, clean energy sector development, as well as promoting trades with bilateral partners. India is exploring free trade agreements with the UK and the EU, after signing a deal in March 2024 with the European Free Trade Association (EFTA) comprising Switzerland, Norway, Iceland and Liechtenstein. In the Middle East, the south Asian country had signed a trade agreement with the UAE in May 2022 and has recently concluded negotiations with Oman. Insight article by Priya Jestin


Latin America stories: weekly summary

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 31 May. NEWS Brazil’s Porto Alegre port still shut after flooding, industry demands more support The Port of Porto Alegre remains shut one month after severe flooding hit the Brazilian state of Rio Grande do Sul, while trade groups are asking the authorities to extend their financial support to speed up the recovery. Automotive major Stellantis plants in Argentina, Brazil still affected by floods aftermath Stellantis’ facilities in Argentina remain shut and its plant in Goiana, northeast Brazil, has also partially stopped, a spokesperson for the global automotive major said to ICIS on Friday. Canadian fertilizer producer Nutrien halts three Brazil fertilizer blending plants Canadian fertilizer major Nutrien has announced a decision to halt three fertilizer blending plants in Brazil as it undergoes a reorganization of their operations for improved efficiency within the country. Brazil’s Unigel on force majeure for HIPS due to lack of input from Triunfo Unigel has declared force majeure for high impact polystyrene (HIPS) because one supplier based in Brazil’s floods-hit state of Rio Grande do Sul cannot deliver the feedstock, according to a letter to customers seen by ICIS. Brazil’s chemicals importers mobilize against tariffs hike proposed by producers Brazil’s importers of chemicals are lobbying the cabinet not to implement the hikes to import tariffs proposed by the country’s producers, represented by trade group Abiquim. PRICING LatAm PP domestic, international prices unchanged as market awaits June prices Domestic and international polypropylene (PP) prices were assessed as unchanged this week across Latin American (LatAm) countries. LatAm PP domestic, international prices unchanged as market awaits June prices Domestic and international polypropylene (PP) prices were assessed as unchanged this week across Latin American (LatAm) countries.


INSIGHT: Italy’s plastic packaging tax delay proves most companies still focused on costs over sustainability

LONDON (ICIS)–The postponement of Italy’s plastic packaging tax to July 2026 shows that, for many brands and fast-moving consumer goods (FMCG) companies, the threat of financial penalties or the push of regulatory obligation is still the main driver for increasing the use of recycled plastics in packaging. Italy has extended the rollout of its €450/tonne plastic packaging tax until July 2026, marking the seventh postponement of the tax which was due to come into effect in July this year. ICIS asked participants across several polymer markets what this means for both the virgin and recycled sectors, and the responses overwhelmingly point to the fact that, without heavy financial penalties or a legal requirement under either state or EU law, many companies will currently opt for cost savings over sustainability. DELAYING RECYCLED DEMANDThe tax would add €450/tonne to the price of virgin plastic in Italy, but the postponement led many sources to expect companies that were considering increasing the use of recycled plastics to stick with virgin material for now. In the polyethylene terephthalate (PET) market, those companies that were following the development of the legislation will now continue to use PET rather than switch to recycled polyethylene terephthalate (R-PET), according to one beverage brand. This view was echoed by others, with a converter serving the market stating companies will stay with virgin polymer for the next two years without the financial incentive to move to more recycled content. One virgin polyethylene (PE) and polypropylene (PP) producer now sees less pressure to both a circular economy solution as well as investment in the recycling sector. Other comments from market sources reiterated the fact that, without this tax in place, the businesses in or serving the Italian market have lost their incentive to move to higher recycled content levels, especially at a time when prices for recycled material such as R-PET and recycled polystyrene (PS) are commanding a significant premium over their virgin counterparts IMPACTING INVESTMENTAnother common thread running through the reactions to the delay was the impact it could have on investment in certain recycled sectors. One virgin PS source said it expected a slowdown in the development of recycled PS, highlighting the current gap between higher-priced recycled PS and virgin PS preventing companies from exploring the recycled market more. Adding €450/tonne to the price of the virgin material is a substantial step to disincentivize the use of PS and drive people towards recycled PS. A second PS market participant said countries need a mechanism like a tax to promote recycled content and the absence of such a driver will make investment in recycled PS harder. From the brand side, a large FMCG said having the tax in place would help incentivize its customers to use more recycled content, but for the time being it would have to rely on its own and its customers’ sustainability targets – those that have them – to continue to support the argument for the use of recyclate. WIDER RECYCLING ISSUESWhile the delay of the tax only impacts the Italian market, it points to a wider issue seen across both European and global markets when it comes to increasing recycled material usage. Without the financial incentive of something like a tax, or without the legal obligation of a regulation, directive or law, many companies right now will choose margins over sustainability especially in a challenging macroeconomic climate. A good example is the upcoming implementation of the Single Use Plastics Directive (SUPD), which among other things, mandates the use of 25% R-PET in PET beverage bottles from 1 January 2025. Many R-PET market participants have yet to see demand for R-PET reach the levels expected ahead of implementation. The issue is linked to the lack of clarity around how the SUPD will work; how the 25% will be measured – by individual unit or country-wide incorporation – who will be checking the percentage of R-PET in the bottles and what the penalties will be for those who miss the target. Some R-PET sources think some brands may simply declare they are using R-PET when they are not because they do not expect they will be audited, or others may simply ignore the Directive because of a lack of enforcement. It was a similar situation with the Spanish €450/tonne plastic packaging tax in January 2023. R-PET sources saw no impact on demand last year – though that may have been caused by the wider cost-of-living crisis impacting consumer demand during 2023 – and it was only in May this year that the first Spanish company has reportedly been audited by Spanish authorities to ensure compliance. The UK is an interesting case study in the use of a tax to drive recycled plastic inclusion. In the financial year 2022-2023, Plastic Packaging Tax (PPR) receipts collected by HM Revenue and Customs (HMRC) totaled £276 million. Government data shows of the total plastic packaging manufactured in and imported into the UK, 39% was declared as taxable under the PPT, and of the remaining 61% declared, 40% contained 30% or more recycled plastic. While there was a good proportion of recycled plastic placed into packaging during the financial year, the £276 million collected shows that many companies paid the £200/tonne rather than pay more for recycled material. There are instances that show alternative approaches to taxation or regulation can have a positive impact on the recycling sector. In France, lower eco-modulation fees – a form of Extended Producer Responsibility (EPR) – on the sorting of mixed plastic waste led to the creation of a recycling stream for low density polyethylene (LDPE) flexible materials and a growing market for recycled low density polyethylene (R-LDPE) bales and pellets, for example. Eco-modulation fees can also encourage the use of certain types of material but also disincentivize the use of others, as seen in the Czech Republic, where the eco-modulation fee for using clear PET bottles was lowered in 2021, while the fee for placing coloured PET bottles on the market – perceived to be harder to recycle than clear – was increased. The reaction to the Italian tax, the revenue generated by the UK tax and the seeming lack of urgency from some beverage brands ahead of the SUPD indicates that for many companies currently, increasing the use of recycled plastic is nowhere near the top of their list of priorities. While consumers focus on reducing the cost of living and companies focus on improving squeezed margins, investment in recycling and the drive to reducing virgin plastic consumption will most likely take a back seat for now. Additional reporting by Stephanie Wix, Caroline Murray, Ben Monroe-Lake, Carolina Perujo Holland and Mark Victory Insight article by Matt Tudball


INSIGHT: Mexico’s emissions, energy policy and Pemex main challenges for new president

SAO PAULO (ICIS)–Mexico’s new – and first female – president Claudia Sheinbaum will have to decide soon into her term whether she changes course in two key aspects: energy policy and greenhouse gas (GHG) emissions, and the support for state-owned, indebted and underperforming energy major Pemex. The resounding victory obtained by the governing party Morena, whose candidate Sheinbaum was hand-picked by the current president Andres Manuel Lopez Obrador, may allow Sheinbaum to change course and free herself from the previous administration’s commitments. As of 09:00 local time on Monday, with more than 82% of votes counted, Sheinbaum was on course to reach 60% of the vote in the presidential election. At nearly 30 million votes, she more than doubles the center-right candidate Xochitl Galvez. Turnout stood at 60%. But Morena’s victory for the presidency was widely expected, and focus is now on the results to Congress, where the party has also obtained a resounding victory and could be on course to obtain a ‘supermajority’: two-thirds or more of seats in Congress which would open the door to one-party constitutional reforms. Investors, however, are not as impressed as Mexico with Morena candidates, and have never been too friendly towards a political party which by nature wants to expand the role of the state in the economy, which often leads to more taxes for companies and households. On Monday morning, the main bourse was down 5.5% at the opening. Sunday’s elections showed once again how investors’ concerns are often far from those of the voters, who gave Morena another chance as the economy has performed relatively well and despite insecurity, Mexicans’ main concern, still rising and taking dozens of lives daily: in 2022, the last full-year statistics available, a total of 42,888 homicides were registered, 1,000 up from 2021. PEMEXOne of Sheinbaum’s main challenges soon after taking office will be Pemex, the most indebted global crude oil major with debt commitments of around $100 billion, and whom has only managed to financially get by with cash injections from the Federal government, while the company’s performance remains lackluster. Pemex could become a liability for the Federal finances and for Mexico’s sovereign debt ratings if continued – and increasing – Federal Budget support is needed, according to analysts at the major US credit rating agencies Fitch and S&P. In the private sector, that would be considered a loss-making company and be either turned around or shut altogether. In Lopez Obrador’s Mexico, it has been ‘energy sovereignty’ and his cabinet has never questioned the large sums of public money – $4.0 billion in the 2023 budget – the company requires to pay for its commitments. For 2024, $8 billion was put aside. The cabinet has always responded to any criticism regarding Pemex arguing the company remains Mexico’s largest income generator, as it accounts for around 7% of the Treasury’s income, and argued the financial support to meet debt obligations was indispensable to keep that income coming. The financial support has mostly been used to cover debt obligations, but not expansions or overhauls to make the company fit for the future. Equally, Pemex’s debts with its own suppliers – smaller companies in Mexico who create thousands of jobs – have been widely reported, and only partially addressed by Lopez Obrador’s administration. Pemex’s aging facilities are also on the spotlight. At the start of his term in 2018, the president said he wanted Pemex to increase its output to somewhere above 2 million barrels/day. In 2023, on average, it produced 1.875 million barrels/day, which was nonetheless a 5% increase compared with 2022. Pemex never got there and, given the difficulty to do so, it stopped publishing the 2 million barrel/day target at some point last year. To surpass the 2 million barrel/day target, Pemex needs to heavily invest in its fields and facilities, analysts at Fitch said in April. While other state-owned as well as private oil majors are speeding up their investments in other energies to allow them a future past-oil, Pemex remains a quintessential crude producer and one who, on top of it all, operates aging facilities. That adds another financial drag on the company as old facilities require recurrent maintenance and, moreover, too often have caused fatal accidents. “Policy continuity will largely prevail, although Sheinbaum is likely to face greater scrutiny of the public finances and she is likely to be less supportive than her predecessor of the oil sector,” analysts at Capital Economics said on Monday. “One key area of difference with the AMLO [acronym widely used for the president’s name, going by his initials] Administration is likely to be energy policy. While Sheinbaum said that she will promote ‘energy sovereignty’, perhaps a nod to (for now) continuing to provide support for the state oil company Pemex, her environment-friendly credentials shone through as she called for a focus on renewable energy.” 10 YEARS DIFFERENCE BUT WORLDS APARTSheinbaum has repeatedly said she aims to keep the welfare state expansion policies of her predecessor, but she has showed more openness to change in the energy sector as private investments are disinvited by Pemex’s state-backed dominance while the country lags in renewables implementation. Sheinbaum is 60 years old, and Lopez Obrador is 70, which in principle would not sound much of a difference, but between the two there seems to be an actual generational gap. Lopez Obrador spent decades on the fringes of the Latin American left – with repeated and failed attempts in the 1990s and 2000s to win the presidency – until Mexicans’ tiredness with the traditional political parties finally gave him that chance in the 2010s. Sheinbaum started her career as environmental secretary for the City of Mexico in 2000. Analysts say her green credentials are real, and she will put them into practice. Her last public post was, until 2023, that of Mayor of Mexico. Morena has become Mexicans’ favorite party as the economy has performed relatively well in the past five years, pandemic shock in between included, and jobs have been created. Nearshoring of North American companies is set to prop Mexico’s industrial sectors in coming years. However, it is easy to think that many Mexicans will not miss one thing: ‘Las Mañaneras’ (The Matinal Shows), the president’s daily – and at times running for three hours – press briefings where he speaks “directly to the people” about anything and everything. However, Lopez Obrador has always been reluctant to talk about security – Mexicans’ main concern, as homicides continue increasing. Judging by her personality and more discreet tone, most doubt Sheinbaum will put aside two hours of her daily schedule to ‘talk to the people’. She may just use X, formerly Twitter, like most politicians do in 2024 or hold press conferences where journalists can challenge her on her commitments. EMISSIONS REDUCTION URGENTHowever, over time Lopez Obrador’s term may not be remembered by the failure to make Pemex a functioning energy major, or by ‘Las Mañaneras’, but for the increase in GHG emissions, which are causing climate change. Mexico signed the Paris Accord in 2015 under the administration of Enrique Peña Nieto. Initial attempts to get on track during his presidency were practically ignored by Lopez Obrador or even overturned. According to the Climate Action Tracker (CAT), a non-profit scientists’ organization which tracks countries’ progress on reducing emissions, Mexico has not only stalled but gone backwards. Its latest assessment about the country makes obscure reading (see here). “Mexico’s climate policies continue to go backwards, as fossil fuel use is prioritized and climate-related policies and institutions dismantled. Mexico’s updated 2030 target (NDC) submitted in November 2022 results in higher emission levels than the targets from 2016, breaching both agreements under the Paris Agreement and Mexican Law – where governments committed to improve their targets over time,” said CAT. “The updated NDC lacks transparency and disguises its lack of ambition by counting forests differently in the base and in the target year. Mexico will meet the unambitious target with already implemented policies as emissions continue to rise through 2030. With this update, the CAT’s rating of Mexico’s climate targets and action worsens from ‘Highly insufficient’ to ‘Critically insufficient’.” In that regard, Sheinbaum is not the Lopez Obrador type who feels more comfortable talking about crude oil being a nation’s sovereign right as opposed to talking about humanity’s biggest challenge, which ultimately must lead to a world without oil. Moreover, the partial success of other Latin American countries – Brazil and Petrobras come to mind – to make their energy major successful global companies has not been replicated in Mexico. The company lags on greener energies, and its own financial reports show how it is behind in adapting to the green economy. Pemex’s role continues diminishing and without bold action it may never get to be a ‘green energy provider’, as other oil majors see themselves in the coming decades. Notably, how much of the corruption in Mexico’s system is to blame is also food for thought: Pemex is unique in publishing in its financial reports a section about “theft subtraction”. Sheinbaum has daunting challenges ahead, but she has also obtained the biggest mandate from voters ever in a presidential election. How she will use that mandate, how she could fly free – or not – from Lopez Obrador’s policies, and how her predecessor may try – or not – to influence her thinking will be one of the fascinating stories in Latin American politics for the next five years. Front page picture: Claudia Sheinbaum in an archive image Source: Shutterstock Insight by Jonathan Lopez


Automotive major Stellantis plants in Argentina, Brazil still affected by floods aftermath

SAO PAULO (ICIS)–Stellantis’ facilities in Argentina remain shut and its plant in Goiana, northeast Brazil, has also partially stopped, a spokesperson for the global automotive major said to ICIS on Friday. In Argentina, Stellantis operates production facilities in Ferreyra, in the Cordoba province in the north, where trade with Rio do Grande do Sul is commonplace. The company said in mid-May those facilities had to shut due to the lack of inputs. On Friday, it added Goiana has now been affected too and it is partially out of operations. “Both plants in Argentina are still out of production. In Brazil, Goiana facilities has partially stopped,” the spokesperson said. Stellantis is the result of the merger between Fiat Chrysler and PSA Group. Germany’s automotive major Volkswagen stopped production at three plants in the state of Sao Paulo in mid-May due to the lack of inputs. The company had not responded to a request for comment at the time of writing. Rio Grande do Sul is Brazil’s southernmost state and petrochemicals-intensive automotive parts producers there are major suppliers to the rest of Brazil and Argentina. As of Friday, the emergency services in Rio Grande do Sul said 169 had died due to the floods, while 44 remains unaccounted for. Nearly 40,000 people are still taking refuge in shelters, while 580,000 remain displaced from their homes. Nearly 2.4 million have been affected by the floods. Earlier in May, a spokesperson for Brazil’s automotive trade group Anfavea did not respond to questions from ICIS about the impact of the floods on the sector's annual output. However, it said the trade group would publish its first estimates at a press conference on 6 June, when it will publish production, sales and export data for May. In early May, at the press conference presenting April data, the trade group said it feared the sector could be hit given Rio Grande do Sul's importance to Brazil's auto industry. The petrochemicals hub of Triunfo, near Porto Alegre, returned to operations on 20 May, led by Brazil’s polymers major Braskem, but a consultant in Porto Alegre said to ICIS the reopening there was the odd one out amid widespread disruption for most industrial sectors. As of Friday, the Port of Porto Alegre, the state’s largest city, remained shut, although Rio Grande and Pelotas ports were operating normally. The emergency services in Rio Grande do Sul said 169 had died due to the floods, while 44 remains unaccounted for. Nearly 40,000 people are still taking refuge in shelters, while 580,000 remain displaced from their homes. Nearly 2.4 million have been affected by the floods in the 12-million people state of Rio Grande do Sul. The automotive industry is a major global consumer of petrochemicals, and chemicals make up more than one-third of the raw material costs for an average vehicle. The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA), among others. Front page picture: Stellantis' facilities in Ferreyra, province of Cordoba, Argentina; archive image Source: Stellantis 


APIC ’24: Overcapacity weighs on Japan petrochemical production – JPCA

SINGAPORE/SEOUL (ICIS)–Cracker operations in Japan will remain “challenging” this year amid soft demand while capacity expansion in China continues, according to the Japan Petrochemical Industry Association (JPCA). C2 output falls to record low in 2023 Production of five major plastics shrink by around 5% Capacity optimization among industry main tasks “With new cracker capacities being planned in China almost every year at a pace far exceeding demand, the operation rates of domestic crackers are expected to remain challenging,” said a JPCA report prepared for the Asia Petrochemical Industry Conference (APIC) being held in Seoul. The two-day conference ends on 31 May. In 2023, Japan’s ethylene (C2) production shrank 2.3% to a record low of 5.32 million tonnes, as domestic crackers ran below full capacity, JPCA data showed. “The operation rates of domestic crackers have remained below 90% (this rate is said to be the criterion for judging the economic situation) since August 2022 and the monthly operation rate dropped below 80% four times in 2023,” JPCA said. Japan, which was dislodged by Germany as the world’s third-biggest economy in 2023, is projected to post a 2024 GDP growth of around 1.3%, down from last year’s 1.9% pace. In Q1 2024, the economy shrank at an annualised rate of 2.0% as both consumption and capital spending weakened. For the whole of 2023, the country’s total production of five major plastics – namely, linear density polyethylene (PE), high density PE (HDPE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC) – declined by an average of 4.7% to 6.02 million tonnes. Japan production of major petrochemicals (in thousand tonnes) Product 2023 2022 % change Ethylene 5,324 5,449 -2.3 LDPE 1,223 1,347 -9.2 HDPE 661 714 -7.4 PP 2,075 2,120 -2.1 PS 564 654 -13.8 PVC 1,496 1,483 0.9 Styrene monomer (SM) 1,428 1,542 -7.4 Ethylene glycol (EG) 264 351 -24.8 Acrylonitrile (ACN) 341 422 -19.2 Sources: JPCA, Japan's Ministry of Economy, Trade and Industry (METI), Japan Styrene Industry Association (PS, SM) and Vinyl Environmental Council (PVC) Domestic demand as ethylene equivalent for the year declined by 11.9% to 3.87 million tonnes, according to JPCA data. “In 2024, there is a risk of a decline in demand due to the deterioration of the global economy, such as price hikes of raw commodities due to supply disruptions caused by several problems,” JPCA said, citing Russia’s prolonged invasion of Ukraine, the Israel-Hamas war, and attacks on commercial ships in the Red Sea. “But a certain amount of demand growth is expected due to the resilience of the US and some developing countries’ economy, and the global economy would have a possibility to make a ‘soft landing’,” JPCA stated. Economists are growing more confident that the US – the world’s biggest economy – will be able to post a 2024 growth rate of 2.4%, easing from the actual GDP growth of 2.5% in 2023. China, although beset by a slumping property sector, should be able to post a 5.0% GDP growth, according to the revised forecast by the International Monetary Fund (IMF). In the report, JPCA also emphasized the petrochemical industry’s tasks to engage in “green” or environmental-friendly transformation toward carbon neutrality by 2050; to enhance and optimize excess production capacity amid a declining population; to push for digital transformation; and contribute to a recycling-oriented society. “In Japan, demonstration experiments using new process technologies and raw materials that contribute to green activities have begun, such as biomass-based fuel, bio-material-based olefins, ammonia synthesis, and hydrocarbon synthesis,” it said. Focus article by Pearl Bantillo


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